December 03, 2015

Playing to Win: How Strategy Really Works

Issue No. 334 of Your Weekly Staff Meeting suggests you take a second look at your paper towels—and then address the critical strategy question. And this reminder: subscribe here for Drucker Mondays, as 52 guest writers share their favorite quotes and commentary from the book, A Year With Peter Drucker.

Strategy Sameness: Recipe for Mediocrity

POP QUIZ!1) Does your organization or company have an updated two-page summary of your strategy?2) Does your board own the strategy?

So what do Bounty paper towels have to do with the strategy question? It’s a fascinating case study noted in chapter three of a fascinating book on strategy, Playing to Win: How Strategy Really Works (Harvard Business Review Press, 2013).

It’s so fascinating I now bring a Bounty paper towel roll to client sessions on strategic planning.

At Procter & Gamble in 2001, the president of global family care (the tissue and towel division) saw sales of Bounty plateau in North America. They wondered: could future growth come from Europe, Asia and Latin America?

So in addressing a key strategy question—where to play (chapter three)—the P&G team went back to the drawing table and invested in research. “Deep consumer understanding is at the heart of the strategy discussion,” the authors insist. And they should know.

Co-author A.G. Lafley is the former chairman of the board, president, and CEO of Procter and Gamble. Co-author Roger L. Martin is dean of the University of Toronto’s Rotman School of Management. In 2011, Martin was named by Thinkers50 as the sixth top management thinker in the world. (Not a bad plaque for your office wall.)

So what did paper towel users—the consumers—tell P&G about Bounty?

Bounty “had by far the best equity in its category—one of the strongest brand equities in the company,” the division president reported. “If you asked, virtually 100 percent of the people would say Bounty is a great brand and a really good product. Then some would go off and buy something else.” So they drilled down farther. Obviously, something was wrong with this picture!

Then they did the hard work—they asked the consumer even more questions. Or as Peter Drucker urges in his classic five questions: #2—Who is the customer? And #3: What does the customer value? (By the way, the book’s dedication: “Inspired by Peter Drucker (1909-2005), mentor and friend.”)

The Bounty team identified three distinct types of paper towel users: • Group 1 cared about “both strength and absorbency. For this group, Bounty was a perfect fit—a great combination of the two attributes they cared most about. The team found that among these consumers, Bounty was already the clear winner.”

• Group 2 wanted “a paper towel with a cloth-like feel. They didn’t care much about strength or absorbency, certainly much less than the core Bounty group did. Rather, this group of customers cared about how soft the paper towel felt in their hand.”

• Group 3 had “price as their top priority, though not as their sole concern. The need of those consumers was also on strength. It wasn’t at all on absorbency, because they had a compensating behavior to address the absorbency shortfalls of lower-price paper towel products: they would simply use more sheets.”

Based on consumer research, Bounty decided to serve all three segments with the development of two new products. So at stores across North America today, you’ll find at least three choices:• Bounty • Bounty Extra Soft • Bounty Basic

Interestingly, Bounty Basic is stronger than its competing low-priced paper towels and costs about 75 percent less that the traditional Bounty paper towels. And get this—Bounty Basic is stocked on shelves far away from the traditional Bounty.

Raise your hand if you already knew all of this! (I didn’t.)

The big idea? One size doesn’t fit all. You already knew that, but when is the last time you did a careful, detailed analysis of every program, product, or service you offer?Have you hit a sales plateau? Are you forcing one program down the throats of three or more very diverse customer segments?

(Memo to nonprofit CEOs and fundraisers writing your year-end appeals: Stop sending me mail and emails thanking me for my faithful support—if I’ve never given you any money. Start with two segments: current donors and non-donors. For more insight, read Development 101.)

Study Playing to Win with your team and you’ll appreciate the practical approach to creating a winning strategy. You’ll learn what strategy is, and what strategy is all about (choice).

Read pages 4 and 5—and you’re hooked (and convicted)! The authors list five ineffective ways that many leaders tend to address the strategy process: 1) “They define strategy as vision. 2) They define strategy as a plan. 3) They deny that long-term (or even medium-term) strategy is possible. 4) They define strategy as the optimization of the status quo. 5) They define strategy as following best practices.”

Lafley and Martin add, “Every industry has tools and practices that become widespread and generic. Some organizations define strategy as benchmarking against competition and then doing the same set of activities but more effectively. Sameness isn’t strategy. It is a recipe for mediocrity.”

[ ] Next Step Option #1: Who should read and report on this book in the next 30 to 60 days?

Your Weekly Staff Meeting Questions:1) At Procter & Gamble, communicating the strategy included three themes: “#1: Make the consumer the boss.” Who’s the boss in your shop?2) At a two-day off-site retreat, where the P&G team discerned many of their products were no longer relevant for the consumer and that they had been “out-innovated,” an idea sparked the launch, two years later, of the Swiffer in the hard-surface cleaners product line. Ten years later, it was in 25 percent of U.S. households! When is the last time you had a productive off-site retreat?

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Does Your Board Own the Strategy?Insights from Mastering the Management Buckets: 20 Critical Competencies for Leading Your Business or Nonprofit

As we cycle through the 20 buckets, here are some insights from Chapter 3, The Strategy Bucket, and Chapter 14, The Board Bucket, in Mastering the Management Buckets:

He notes, “Strategy should always be in the back of directors’ minds. It helps to have the strategy brief or a two-page sheet of bullet points in the binder for every meeting.”

Then Charan cautions us, “If the board and the CEO have lasting substantive differences, they have a choice: stay with the strategy or replace the CEO. Consider that management has a shelf life too, just like the strategy.”

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